The Flip Side of Health-Care Reform

A very good, and important, article from the fine folks at Kaiser Health News:

President Obama and leading Democrats have stressed that people who like their employer-sponsored insurance would be able to keep it, under a health care overhaul. But they haven't emphasized the flip side: That people who don't like their coverage might have to keep it.

Under the main health bills being debated in Congress, many people with job-based insurance could find it difficult to impossible to switch to health plans on a new insurance exchange, even if the plans there were cheaper or offered better coverage. The restrictions extend to any government-run plan, which would be offered on the exchange.

There is, as far as I can tell, one political reason, one economic reason and one one policy reason for restricting the exchanges.

The political reason is that people like what they have, or are at least scared of what they don't know, and are thus skeptical of any health-care reform plan that would change their current arrangements. One of the goals of health-care reform, in fact, is to maximize employer-based coverage, which will be accomplished through the employer mandate. If employers could simply move over to the exchange -- which would probably be quite a bit cheaper for them -- then a lot of people will find their current insurance changing, and reformers don't want that.

The economic reason is that the exchange is where the subsidies live. If you make $30,000 but you work full-time for The Washington Post, The Washington Post pays for the bulk of your health-care coverage. If you were moved over to the exchange, you'd be eligible for pretty significant subsidies. That would make health-care reform costlier to the government, which would in turn make it tougher to pass. Another way of putting this is that the fewer people on the exchange and using subsidies, the cheaper health-care reform will be.

And the policy reason is that if the exchange is open to all employers in the first year, it's likely that the employers having trouble affording health-care insurance -- that is to say, the employers with sicker and older workforces -- will quickly buy in, while the young, cheaper employers won't. That could leave the exchange with a bad risk pool and thus high costs.

All these decisions make sense if you buy into the starting premise of health-care reform: If you like what you have, you can keep it. A policy that preserves the current system is necessarily timid with ideas that could harm the current system. And that's what we're seeing. From a political perspective, that concession was probably an important, and maybe even an essential, one. But from a policy standpoint, it was a huge concession nevertheless.

The new health plans coming out of
congress is another ship wreck-no better than the "doughnut" rolling down the hill

Congress should change the drug plan, that is not part of Medicare, before looking into health reform.

This monster that came out of the
committee (Senate) gives the insurance companies the green light for business as usual.

It doesn't look like Medicare and it
doesn't look like single-payer health plan, it just look like hell.
Kennedy's illness must be affecting
his brain. Kennedy is from Mass. and they have a failed health plan
left behind by Romney. I think the
committee copied the Mass. plan.

We Democrats won the election and
the Democrats act like they lost the
election.

Had Ralph Nader been president we
would have had free health care from
day one! This real American would
get rid of the insurance companies
out of health care overnight. The
insurance companies drive up the cost and should be wiped from the
face of the earth, forever!

"From a political perspective, that concession was probably an important, and maybe even an essential, one. But from a policy standpoint, it was a huge concession nevertheless."

It really is a political concession as well. Portability as a political concept (not mentioning the policy implications) is something that presumably offers many Americans real value. The challenge with the current reform is that the value propostion to most Americans is pretty unclear-- Obama et al. always leads off with controlling costs, but no one really thinks they are really doing that substantively, so that doesn't have much traction.

If you're one of the 80-85% of Americans that are satisfied with your health care-- what are the reasons you support this health care reform? There just isn't much tangible benefit in a political sense, yet there's a trillion dollar price tag.

A Wyden-Bennett/portability focus was a higher risk-higher reward proposition. It had more to offer all Americans, better mechanisms for controlling costs, yet asked Americans to take some risk. That would have been my preference. Obama has instead taken a lower risk-lower reward option- no doubt there are benefits for coverage expansion, community rating, health insurance exchange, etc. but Kaiser is highlighting the opportunity missed-- politically and policy-wise-- and rightfully so.

ABC hosted an infomercial “Obama Knows Healthcare”. The program featured President Obama discussing his controversial public healthcare plan answering questions from audience members pre-selected by the network. For more of this article read "Obama Manifesto" posted at http://www.cliffyworld.com

Could you please do a new blog post elaborating on this sentence: "The economic reason is that the exchange is where the subsidies live."

If a healthcare exchange could provide higher-quality, lower-cost, more portable insurance to employees than their employer can purchase on the open market, why shouldn't the employer be allowed to use the exchange. Or, phrased differently, why can't there be two tiers on the health exchange: one subsidized one for individuals and one non-subsidized one for employers who want to offer the "standard" exchange options.